Following Quebec and British Columbia, the federal government plans to create a federal register on individuals with significant control searchable by the public.
The federal government has enacted legislation that creates a federal register on individuals with significant control that will be searchable by the public. Current as of January 22, 2024, private corporations governed by the Canada Business Corporations Act (the “CBCA”) will have to file the information contained in their registers of individuals with significant control (“ISC Registers”) with Corporations Canada, and some of the information in the ISC Registers will be available to the public.
Since June 2019, private federal business corporations have been required to create and maintain ISC Registers. By increasing corporate transparency, the purpose of the ISC Registers is to assist with combatting tax evasion, money laundering and terrorist financing (for more information, please see: “Bill C-86 – New record-keeping obligations for all CBCA private companies”). At present, the information in the ISC Registers is only available to tax and police authorities, certain regulatory agencies and shareholders as well as creditors of CBCA corporations.
Bill C-42 – An Act to amend the Canada Business Corporations Act (...) (“Bill C-42”), which is coming into force in its entirety on January 22, 2024, will implement a 2022 proposal by the federal government to create a publicly accessible federal register (the “Federal Register”; please see our bulletin: “Transparent to the World – Push for Public National Ownership Registry Unveiled in 2022 Federal Budget”).
The introduction of the Federal Register follows similar developments in Quebec (please see our bulletin, “Bill 78: What Impact will it Have for Enterprises?”) and British Columbia (please see our bulletin, “Deeper Down the Rabbit Hole – British Columbia Corporate Transparency Register Will Become Accessible to the Public”). However, it also comes at a time when certain other jurisdictions are beginning to restrict public access to beneficial ownership information. In late 2022, for example, the Court of Justice of the European Union struck down public access to beneficial ownership information in Europe on the basis that it interferes with overarching privacy and data protection rights (view the court’s judgment).
All CBCA corporations are subject to the new ISC Register requirements, and even those that are exempt from filing information on individuals with significant control will still need to file an annual confirmation of that exemption.
The New Federal Register
Presently, every private CBCA corporation must maintain and review at least annually an ISC Register disclosing all individuals with significant control over the corporation. These include:
- Individuals who are registered or beneficial holders of a significant number of shares of the corporation;
- Individuals who have direct or indirect control or direction over a significant number of shares of the corporation; and
- Individuals who have any direct or indirect influence that, if exercised, would result in control in fact of the corporation.
The implementation of Bill C-42 requires each private CBCA corporation to file information contained in its ISC Register with Corporations Canada:
- Upon incorporation and after amalgamation or continuance under the CBCA;
- On an annual basis (at the same time as the filing of the corporation's annual return); and
- Within 15 days after each update of a corporation’s ISC Register.
The manner and form of these filings would be determined by Corporations Canada.
Failure to Comply with Federal Register Filings – New Enforcement Tools
Under Bill C-42, a director or officer of a corporation who knowingly authorizes, permits, or acquiesces in the contravention of the corporation’s obligations in respect of its ISC Register information commits an offence. The obligations to which the offence applies are the obligation to prepare and maintain a corporation’s ISC Register and the obligation to disclose the information in the ISC Register to an investigative body that has made a request pursuant to the CBCA. Bill C-42 adds an obligation to provide the information in a corporation’s ISC Register to Corporations Canada. The punishment for this offence is a fine of up to C$1,000,000 on summary conviction or a term of imprisonment not exceeding five years, or both.
Corporations Canada may also refuse to issue certificates of existence (and presumably certificates of compliance) for CBCA corporations that are not in compliance with their Federal Register filing obligations. As these certificates are often needed to obtain financing or for other commercial transactions, failure to file or to keep the information in the Federal Register up to date could also have substantial economic implications for private CBCA corporations.
Under Bill C-42, Corporations Canada has been given the authority to make inquiries of any person on compliance with the provisions relating to the disclosure of individuals with significant control or require verification of information in a corporation’s ISC Register by affidavit or statutory declaration.
Further, if a CBCA corporation does not fulfil its filing obligations for the Federal Register within 30 days of an amalgamation or continuance under the CBCA, Corporations Canada may subject such corporation to administrative dissolution. A CBCA corporation may also be subject to involuntary dissolution by Corporations Canada if it fails to file information contained in its ISC Register with Corporations Canada at the same time as the annual filing of its annual return.
Federal Register Accessible by the Public
Corporations Canada has advised that the new Federal Register will be publicly shared on their website. For each private CBCA corporation, members of the public will be able to obtain the following information on an individual with significant control:
- Their full legal name;
- Their residential address (unless the individual has provided an address for service to the corporation);
- Their address for service (if provided by the individual);
- Dates when the individual became or ceased to be an individual with significant control; and
- A description of how they are an individual with significant control, including, as applicable, a description of their interests and rights in respect of shares of the corporation.
Individuals with significant control who do not wish for their residential address to become publicly accessible should therefore provide an address for service for inclusion in the ISC Register.
Upon introduction of the Federal Register, access by shareholders and creditors to the ISC Registers of private CBCA corporations would be abolished as it would no longer be needed.
Corporations Canada may also provide all or part of the information in the Federal Register to provincial corporate registries, government departments or agencies responsible for corporate law in each province.
Protections for Individuals with Significant Control
Bill C-42 offers some privacy protections for individuals with significant control, prohibiting public access to the above information in limited circumstances:
- For individuals with significant control under the age of 18 years old.
- If Corporations Canada, on application by an individual with significant control, is satisfied that the individual is incapable.
- If Corporations Canada, on application by an individual with significant control, reasonably believes that making the individual’s information available to the public presents or would present a serious threat to the safety of the individual.
- For public office holders with respect to information confidential under the Conflict of Interest Act or similar provincial legislation.
Corporations Canada is required to publish a notice of any decision granting an application to exempt information from being made available to the public.
Protections for Whistleblowers
Corporations Canada is prohibited from making available any information that could reasonably be expected to reveal the identity of a whistleblower, unless such whistleblower provides consent or it occurs in relation to investigations by the police, Canada Revenue Agency and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). These protections would include wrongdoings in relation to the ISC Registers and the Federal Register. Outside of these protections, however, law enforcement agencies and FINTRAC will have access to ISC Register information, whether or not such information is made public.
New Disclosure and Updating Requirements for ISC Registers
Bill C-42 requires private CBCA corporations to take reasonable efforts to obtain additional information about individuals with significant control and to disclose information about individuals in their ISC Register, namely:
- Their residential address;
- Their address for service (at the choice of each individual); and
- Their citizenship.
Moreover, private CBCA corporations are required to take reasonable steps to ensure that they have identified all individuals with significant control and that the information in its ISC Register is accurate, complete and up-to-date:
- At least annually;
- On request by Corporations Canada; and
- During additional times prescribed in future regulations.
Trusts
If a trust owns or controls 25% or more of a CBCA corporation’s shares, the individuals in control of the trust are each considered to be an individual with significant control and must be listed in the corporation’s ISC Register. Individuals in control of a trust are those with a specific role, including:
- the trustee;
- beneficiaries;
- any other individual who has authority to control or does control the trust (this may be the person who creates the trust).
Having control over a trust means having the authority to direct or influence the management of the trust, including directing how a trustee manages shareholders' rights, such as the authority to:
- appoint or remove any of the trustees;
- direct the distribution of the funds or assets;
- direct investment decisions of the trust;
- amend the trust document; or
- terminate the trust.
What Comes Next?
Bill C-42 comes into force in its entirety on January 22, 2024. We will keep you informed of any further developments in this respect.
In the meantime, if you have any questions about the Federal Register and its impact on your corporation, the ISC Registers, or if you need assistance in preparing or reviewing your corporation’s ISC Register, please contact:
- Dierk Ullrich (British Columbia)
- Brendan Sawatsky (Alberta)
- Émilie Clairoux and Guillaume Saliah (Quebec)
